5 things you need to know to start your trading day
Here are five things to know this morning:
On the wings of a dove: U.S. markets are poised to continue their ascent higher on the belief that the U.S. Federal Reserve is done raising rates and cuts are starting to get priced in for next year. The TSX has managed to keep pace with the S&P 500 (more or less) in November, even with oil now entering a bear market (more on that below). It is worth noting that the TSX energy sub industry, and the TSX oil producers in particular, haven’t fallen as much as the price of oil. Although, as the saying goes, you can’t eat relative performance. On oil, we are seeing a bit of a recovery today after crude prices entered a bear market (decline of 20 per cent or more from recent peak). By the way, it’s the fourth bear market in two years, so it is volatile. For investors it means pain in the energy sector, but for the generalists it is good news because it means less inflation. Let’s just not think too hard about why oil is falling and what it says about global demand.
Gapping up: Shares of The Gap are surging after sales only fell two per cent, compared to the nearly nine per cent plunge analysts were expecting. Old Navy was the star and the only banner to post growth (for the first time since 2021!) while Gap didn’t fall as much as feared. Athleta continues to be a disaster with sales falling more than 19 per cent compared to the eight per cent drop expected. Still, it’s a promising development and a win for new Chief Executive Officer Richard Dickson who is only three months into the job and who came over from Mattel. It’s also a triumph over short sellers, nearly 20 per cent of shares outstanding are short.
On the mat: Shares of Applied Materials are taking a hit in the pre-market after Reuters reported it is facing a criminal investigation in the U.S. for allegedly violating export restrictions to China. Applied Materials has previously disclosed a federal review of deliveries to China, but this report is shedding light on the details. The report is overshadowing the semiconductor company’s quarterly results in which it beat profit and sales expectations and offered a forecast for sales that was higher than expected. China is Applied Materials’ biggest market so it is interesting that they still nudged up their forecast even with tighter controls on the kind of semiconductors they can sell to China.
Let’s get real: Shares of Real Matters will be in focus after sales dropped more than expected but profit showed signs of stabilization. The software company that provides property valuation and other real estate based metrics has struggled against a stalled housing market in the U.S. shares reached as high as US$30 per share during the pandemic boom but are now languishing around US$5 per share. Still, 2023 has been something of a recovery year. The stock is up more than 25 per cent and ATB Capital’s Martin Toner says today’s quarterly results mark the second consecutive quarter with positive adjusted profit, reflecting the company’s cost discipline. Toner thinks the stock could benefit from a housing market recovery.
Bet the farm: Fairfax Financial has offered to buy out the rest of Farmers Edge that it doesn’t already own for just $0.25 per share. If accepted, it would represent a stunning 99 per cent decline from Farmers Edge IPO price of $17 per share in 2021. Farmers Edge came to the market during a frothy time for IPO’s with promises of big growth. But the tech company that helped farmers analyze things like weather and soil moisture when planting crops never delivered on those growth ambitions. In fact, sales have fallen in nearly every quarter since going public as it has consistently burned through cash. Farmers Edge has formed an independent committee to evaluate the offer which, while it is below its IPO price, would be a 150 per cent premium to yesterday’s close of $0.10 per share.